Argentina: Decree Nbr. 988 - Regulation of Tax Over Personal Assets Regarding Shares and Company Security Holdings

Last Updated: 9 May 2003
Article by Pablo Ferraro-Mila

Decree Nbr. 988/2003 issued last April 28, has regulated the application of Tax over Personal Assets regarding shareholdings in local corporations, whenever such holdings are owned by individuals domiciled in Argentina and by individuals or legal entities domiciled abroad. Such tax shall be paid-off by the local corporation. The encumbrance shall be calculated over the proportional patrimonial value resulting from the last financial statement closed as of December 31 of the corresponding period, including regarding companies quoting their shares in the Stock Exchange.

The regulation sets forth that such business companies ruled by the Argentine Business Associations Law Nbr. 19.550, permanent offices of foreign companies and de facto or non-registered business associations, shall be liable for the tax obligation of their shareholders and partners. In all cases, such corporations may be reimbursed any tax paid, even by withholding or foreclosing the assets that originated the tax obligation. For this purpose, the corporations may take into consideration the particular situation of each shareholder, including debtor or creditor balances in private accounts, capital increases or decreases, as well as any other circumstance allowing the accurate determination of the share participation.

The tax rate shall be 0,50% of the tax basis applicable to holdings or shares owned by:

(i) individuals domiciled in Argentina or abroad; and
(ii) corporations or any kind of legal entity, domiciled or located abroad.

The tax basis shall be the amount resulting from the difference between the assets and liabilities of the company for the financial year closed as of December 31. If there had been any capital contributions made (including any irrevocable capital contributions for the future issuance of shares) they shall be deduced from the tax basis as long as the capital contributors are not any of such mentioned in (i) and (ii) above.

In case the financial year shall not end on December 31, the following shall be added or subtracted from the net worth calculated pursuant to the paragraph above: (1) capital increases by integration of share or capital contributions, made by those mentioned in (i) and (ii) above between the date the financial year end and December 31; and (2) capital decreases resulting from cash or in-kind dividend payments and income distributed to those mentioned in (i) and (ii) above, after the financial year end (which shall be considered as tax basis), and without taking into account the financial year during which such distributed income was generated.

Finally, it is worth noting that the minimum taxable basis of $102.300 shall be inapplicable to this new regime.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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